Sub-penny for your thoughts? Jefferies’ Anna Kurzrok on the Future of Market Structure Reform
Sep 26, 2023
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Anna Kurzrok, Managing director of market structure at Jefferies, discusses the impact of SEC's market structure proposals on institutional players and everyday traders, the trajectory of AI in trading, the fragmentation of trading venues, and off-exchange trading.
Navigating regulatory proposals alongside innovations in trading venues poses challenges for market participants.
The impact of AI in the trading industry is still evolving and requires more exploration, expertise, and regulatory considerations.
Deep dives
The Challenges of Market Structure and Regulatory Agenda
One of the main challenges in the market is the intersection of heavy, aggressive regulatory agenda and the potential overhaul of trading. Proposals such as Tipos One settlement and changing Reg SCI are important to the industry. However, navigating these proposals alongside innovations in trading venues and methods of execution poses challenges for market participants. The increasing complexity of regulations and the need to enhance performance for investors adds to the challenges in the market.
Tick Sizes, Access Fees, and Market Structure Proposals
The discussion around tick sizes and access fees is evolving, with proposals aiming to reduce tick sizes and access fees. While there is consensus for some reduction in tick sizes, the impact of implementing such changes in the current trading environment remains to be seen. The question of finding the right tick size for different stocks and striking a balance between competitiveness and market fairness is central to the discussion. Furthermore, discussions around minimum trading increments and their impact on the equity landscape are likely to be challenged and require careful evaluation.
The Proposal of Retail System Standards and Order Competition Rule
The proposal to set a standard trading increment for retail systems and allow exchanges to show orders that provide better prices to retail investors has garnered support and criticism. The challenge lies in marrying the institutional and retail trading environments in one rule. While the intent of promoting competition in retail order execution is sound, potential negative impacts on broader market competition need to be considered. Balancing the need for innovation and flexibility in retail trading with the potential risks of fragmentation is a key consideration.
The Role of AI in Trading and Market Changes
The impact of artificial intelligence (AI) in the trading industry is still evolving. The trajectory of AI and its potential to rapidly transform trading processes and market dynamics is a point of interest. However, understanding and harnessing the full potential of AI requires more exploration, expertise, and regulatory considerations. As AI continues to advance, finding alpha and adapting trading strategies to leverage AI capabilities will be important factors in navigating the market.
Anna Kurzrok, managing director of market structure at Jefferies, joins Ronan and JR to dive into the nuts and bolts of U.S. equities market structure. They chat about what the SEC's market structure proposals will mean for the big institutional players and everyday traders, the trajectory of AI in trading, the fragmentation of trading venues, and what's going on with off-exchange trading. Recorded August 29, 2023.
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